Cincinnati Bar Ass'n v. Shott

• Decision Date: 19 April 1967
• Docket Number: No. 66,66
• Citation: 39 O.O.2d 110,10 Ohio St.2d 117,226 N.E.2d 724
• Parties: , 39 O.O.2d 110 CINCINNATI BAR ASSOCIATION v. SHOTT. D. D.
• Court: Ohio Supreme Court

Page 117

10 Ohio St.2d 117

226 N.E.2d 724, 39 O.O.2d 110

CINCINNATI BAR ASSOCIATION v. SHOTT.

D. D. No. 66.

Supreme Court of Ohio.

April 19, 1967.

The relator, Cincinnati Bar Association, instituted this proceeding before the Board of Commissioners on Grievances and Discipline.

The amended complaint, filed on February 24, 1964, alleges as charge one that the respondent was found guilty by a jury in the Common Pleas Court of Hamilton County on one count of selling securities without a license and on one count of selling securities not exempt from registration which had not been registered or qualified, in violation of Section 1707.44(A) and (C), Revised Code, and alleges as charge three that respondent, during the period from September 17, 1956, to January 18, 1961, did, from time to time, lend one Leslie D. Stickler the total sum of $1,020,510 and did charge and collect, in excess of 8 per cent legal rate of interest, the sum of $373,197.43 in usurious interest, all in violation of former Section 1309.04, Revised Code (now Section 1343.01, Revised Code), and in violation of Canon 32, Canons of Professional Ethics.

Relator alleges that respondent is guilty of misconduct as defined by Rule 27 (now Rule 18) of the Rules of Practice of the Supreme Court of Ohio.

The respondent, in his answer to the amended complaint, admits the convictions asserted in charge one of the amended complaint and denies all other allegations of that complaint.

After a hearing by a panel of the Board of Commissioners on Grievances and Discipline, the board concluded with regard to charge one 'that under the circumstances of this case, the offense of which the respondent was admittedly convicted was a crime involving moral turpitude,' and concluded with regard to charge three that 'it is the conclusion of the board that these transactions were usurious under the Ohio law, and that they involved moral turpitude as well.'

The board, in its recommendations, said:

'* * * In view of the obvious impropriety of the conduct (of the respondent) * * * the board * * * recommends permanent disbarment.'

Additional facts appear in the following opinion.

C. Jackson Cromer, David E. W. Chatfield and Richard H. Ward, Cincinnati, for relator.

Arnold, Fortas & Porter, Thurman Arnold, James F. Fitzpatrick, Washington, D.C., James G. Andrews, Jr., and John A. Lloyd, Jr., Cincinnati, for respondent.

PER CURIAM.

The first charge of the complaint is that the respondent was convicted of selling securities in Ohio without a license and of selling in Ohio unregistered nonexempt securities in violation of Section 1707.44(A) and (C) of the Revised Code.

The General Assembly of Ohio has made such a violation a felony.

The respondent was charged with the violation of this section, indicted by the Grand Jury of Hamilton County and upon trial, convicted by a jury. This conviction was affirmed by the Court of Appeals for Hamilton County, and, upon appeal to this court, the appeal as of right was dismissed, State v. Shott, 173 Ohio St. 542, 184 N.E.2d 213. Upon appeal to the Supreme Court of the United States, the appeal was dismissed and certiorari denied on May 13, 1965, Shott v. Ohio, 373 U.S. 240, 83 S.Ct. 1295, 10 L.Ed.2d 409.

An action for a writ of habeas corpus was instituted in the United States District Court for the Southern District of Ohio, Western Division, which proceeding was dismissed by John W. Peck, J. Upon appeal to the United States Court of Appeals, Sixth Circuit, the judgment of the District Court was affirmed (United States ex rel. Shott v. Tehan, 365 F.2d 191), and the Supreme Court of the United States denied certiorari, 385 U.S. 1012, 87 S.Ct. 716, 17 L.Ed.2d 548.

The respondent, therefore, has been convicted of a felony in this state and has exhausted all rights of appeal and has been sentenced to a term of one to five years in the penitentiary. Further, the respondent has been denied a writ of habeas corpus by the United States Supreme Court. The respondent has also been found liable in a civil action, based upon constructive fraud for the amounts which Stickler paid to him (interest or profit on loans or investments to Stickler who was engaged in a fraudulent Ponzi scheme), and he has exhausted his right of appeal in that action.

The respondent's position is that the conviction for violation of the Securities Act does not involve moral turpitude. The respondent's position was stated in the record of the hearing before the panel of commissioners, D.D. No. 66, volume I, page 14, by his counsel in these words:

'The offense, which is clearly on its face not a crime involving moral turpitude, involved the borrowing of money-that's all the charge there is. A perfectly innocent act * * *.'

It may be arguable that a conviction for a technical violation of the Ohio Securities Act, consisting of the giving or selling of promissory notes at a usurious rate of interest, does not involve moral turpitude under the rules of this court. (It should be noted that the respondent characterizes his transactions with his friends and relatives as the giving of promissory notes by him to his friends for the money loaned by them, calling for the payment of a usurious rate of interest by him, but, on the other hand, he characterizes his transactions with Stickler, which also involved the giving of promissory notes by Stickler to him, at usurious interest rates collected by respondent, as not the borrowing of money on a promissory note but as an investment in the enterprise of Stickler, from which respondent realized a profit rather than interest.)

However, the facts, as testified to by the respondent himself at the hearing before the panel of the Board of Commissioners on Grievances and Discipline, do not support the position of the respondent that his conviction, under the circumstances of this case, does not involve moral turpitude.

It is clear from respondent's testimony that the transactions of borrowing money from a few relatives and close friends on promissory notes at usurious rates of interest or profit were not simple and ordinary promissory-note-loan transactions as the respondent now asserts that they were.

In volume II of the record of the hearing before the panel of commissioners, at page 164, the respondent describes how this entire scheme began, in the following words:

'About eight years ago I was approached by Leslie D. Stickler, who was then a practicing attorney here in Cincinnati, about a business proposition.

'Mr. Stickler told me that he represented various small contractors who from time to time found it profitable to make quick loans, and that they were willing to pay premium rates for these loans.

'Mr. Stickler told me that he did not have money enough himself to handle all these loans, and that as a favor to me he would let me in on what he termed 'a good deal.'

'I think it would be helpful to the panel to understand that I have known Les Stickler since childhood, we went through grade school and high school together, we were friends, and I trusted him.

'Because of that, I took only two precautions before giving any money to Stickler. I did research the Ohio law and I found that it is not a crime to accept a premium for loaning money.

'* * *

'* * * I also checked with another attorney, Richard J. Morr, who at that time was an Assistant City Prosecuting Attorney for the city of Cincinnati, who told me that he had been loaning money to Stickler for some time before I was approached by Stickler. Because of his experience as a practicing attorney, I had respect for his judgment, and when I questioned him he assured me that there was nothing illegal or wrong in the transaction and made some point of telling me about the profits that he had made by dealing with Stickler.

'He also told me that although Stickler always emphasized the risks that were involved in dealing with these contractors, that he had never defaulted with Morr whenever any of these loans came up to be due and paid.

'I finally decided to risk $1,000. When that first note came due Stickler paid me immediately, and thereafter Stickler would call me periodically to tell me he had additional deals that were available to me, and frankly, the temptation was too great to refuse.

'However, never once did he fail to pay me my notes when they fell due.

'My dad knew about my dealings with Stickler and my father asked me about the possibility of his investing money with Stickler. And my mother, who is now deceased, had inherited a little money when her brother died, and she likewise wanted to invest that money with Stickler.

'My wife's two aunts and her uncle wanted to likewise invest with Stickler.

'Although my experience with Stickler up to that time had been very profitable, I did remember that Stickler quite often mentioned the high degree of risk involved in these transactions, and I did not want to feel responsible if any one of these contractors failed and one of my relatives lost money, so I finally thought of a way whereby these relatives could make a profit without actually taking a chance or losing their money.

'I permitted my relatives to make loans directly to me, and I gave them my own promissory note, a conventional cognovit note, with my own personal signature on it.

'Since I had already made money through Stickler, I felt that I was in a better position to assume the risk than my relatives.

'In order to partially compensate for the fact I assumed all the risk, I gave these relatives of myself and my wife an amount that was equal to one-half of the profit that I received from Stickler. In other words, my father would loan me $1,000 and Stickler would want to borrow the $1,000 from me and repay me $200 profit, the promissory note that bore my signature that I gave my father was in the total amount of $1,100. The $100 which I received was not only compensation for my assuming the entire risk, but it also helped pay my office...